Tencent Buyback Spurs Rally

Shares in Tencent Holdings Ltd. have continued to rally after the company bought back shares on the open market in Hong Kong on Monday.

Zuma Press

According to a notice filed on the Hong Kong Exchange yesterday, the Chinese gaming and social networking giant bought back 153,000 of its own shares on the open market for HK$76.7 million (US$9.9 million) on Monday.

If the buyback was meant as a show of confidence in Tencent’s pricing, it worked: shares inched back up 1.6% in trading Tuesday and were up another 2.8% to HK$523 (US$67.5) as of mid morning today. That’s a modest but encouraging gain in the face of an ongoing global rout of global technology stocks which has seen Tencent’s shares down 19% from a March 7 high.

Tencent has a good track record of rebounds in share pricing after buybacks, Morgan Stanley analysts wrote in a note yesterday. Shares rose 8% for the month following the last large Tencent buyback in April 2013, and Tencent shares rose by between 17% and 75% in the 180 days following each buyback since 2012, the analysts wrote.

Tencent has fared better than many of its Chinese peers in the current tech stock downturn. Search engine Baidu Inc. is down 15% since the start of 2014, while web portal Sina Corp. has fallen 34% so far this year, though both Nasdaq-traded shares saw gains in New York trading yesterday. Tencent is still up 5% in 2014, and even with the past month’s correction its shares have more than doubled over the past year.